NEW YORK, Feb. 07, 2019 (GLOBE NEWSWIRE) -- Virtu Financial, Inc. (NASDAQ: VIRT), a leading technology-enabled market maker and liquidity provider to the global financial markets, today reported results for the fourth quarter and the full year ended December 31, 2018.

Fourth Quarter and Full Year Selected Highlights

Fourth Quarter 2018:

  • Net income of $147.9 million, Normalized Adjusted Net Income* of $127.2 million
  • Basic earnings per share of $0.75, and diluted earnings per share of $0.74; Normalized Adjusted EPS* of $0.67
  • Total revenues of $442.2 million; Trading income, net of $366.2 million; Adjusted Net Trading Income* of $299.2 million
  • Adjusted EBITDA* of $195.1 million; Adjusted EBITDA Margin* of 65.2%
  • Quarterly cash dividend of $0.24 per share payable on March 15, 2019

Full Year 2018:

  • Net income of $620.2 million, Normalized Adjusted Net Income* of $375.0 million
  • Basic earnings per share of $2.82, and diluted earnings per share of $2.78; Normalized Adjusted EPS* of $1.96
  • Total revenues of $1,878.7 million; Trading income, net of $1,266.7 million; Adjusted Net Trading Income* of $1,020.3 million
  • Adjusted EBITDA* of $620.0 million; Adjusted EBITDA Margin* of 60.8%
  • Made $750 million total payments on the term loan to-date
  • $65.9 million repurchased to-date out of $100 million in previously approved share buyback program;

* Non-GAAP financial measures. Please see "Non-GAAP Financial Measures and Other Items" for more information.

The Virtu Financial, Inc. Board of Directors declared a quarterly cash dividend of $0.24 per share. This dividend is payable on March 15, 2019 to shareholders of record as of March 1, 2019.

“The benefits of Virtu’s scale and the fruits of our multi-asset class global business, as well as continued benefits from our acquisition of KCG all contributed to the outstanding performance in our business against a positive backdrop for our market making services.  Our customer as well as non-customer facing market making platforms performed very well in the fourth quarter as volatility persisted.  For the full year 2018, we demonstrated once again the durability of our model and the ability to generate strong earnings and cash flows even in less than ideal environments, and outperform when market conditions are more favorable,” said Douglas Cifu, Chief Executive Officer of Virtu Financial.

Acquisition of Investment Technology Group, Inc.

On November 6, 2018, the Company and Investment Technology Group, Inc. ("ITG") entered into a definitive agreement (the “ITG Merger Agreement”) whereby the Company will acquire ITG in a cash transaction valued at $30.30 per ITG share, or a total of approximately $1.0 billion (the “ITG Acquisition”). ITG announced that all proposals submitted to a vote of ITG’s stockholders that are necessary for the completion of the ITG Acquisition were approved at ITG’s special meeting of stockholders on January 24, 2019. The ITG Acquisition is expected to close during the first quarter of 2019 after receipt of all required regulatory approvals and satisfaction of other customary closing conditions. In connection with the ITG Acquisition and the refinancing of the Company's existing term loan, allocations have been completed for a new $1.5 billion, seven year first lien term loan with indicative pricing of LIBOR + 350 basis points, subject to the completion and execution of definitive documentation. ​

Form of Presentation

The Company completed its acquisition of KCG Holdings, Inc. on July 20, 2017 and the reported financial results of the Company for the periods following the acquisition reflect KCG's and the Company's balances, and reflect the impact of purchase accounting adjustments.

Financial Results

Fourth Quarter 2018:

Total revenues decreased 4.8% to $442.2 million for this quarter, compared to $464.5 million for the same period in 2017. Trading income, net, increased 27.9% to $366.2 million for this quarter, compared to $286.4 million for the same period in 2017. Net income increased 342.9% to $147.9 million for this quarter, compared to $33.4 million for the same period in 2017.  

Basic and diluted earnings per share for this quarter were $0.75 and $0.74, respectively, compared to earnings per share of $0.12 each for the same period in 2017.

Adjusted Net Trading Income increased 26.1% to $299.2 million for this quarter, compared to $237.3 million for the same period in 2017. Adjusted EBITDA increased 81.0% to $195.1 million for this quarter, compared to $107.8 million for the same period in 2017. Normalized Adjusted Net Income increased 207.2% to $127.2 million for this quarter, compared to $41.4 million for the same period in 2017.

Assuming all non-controlling interests had been exchanged for common stock, and the Company’s Normalized Adjusted Net Income before income taxes was subject to corporation taxes, Normalized Adjusted EPS was $0.67 for this quarter, compared to $0.22 for the same period in 2017.

Full Year 2018:

Total revenues increased 82.8% to $1,878.7 million, compared to $1,028.0 million in 2017. Trading income, net, increased 65.4% to $1,266.7 million, compared to $766.0 million in 2017. Net income increased to $620.2 million, compared to $18.9 million in 2017. 

Basic and Diluted earnings per share for this year were $2.82 and $2.78, respectively, compared to $0.03 each in 2017.

Adjusted Net Trading Income increased 83.4% to $1,020.3 million, compared to $556.3 million in 2017. Adjusted EBITDA increased 146.6% to $620.0 million, compared to $251.4 million in 2017. Normalized Adjusted Net Income increased 307.2% to $375.0 million, compared to $92.1 million in 2017. 

Assuming all non-controlling interests had been exchanged for common stock, and the Company’s Normalized Adjusted Net Income before income taxes was subject to corporation taxes, Normalized Adjusted EPS was $1.96 for the full year 2018, compared to $0.57 for the full year 2017.

Operating Segment Information

Prior to the acquisition of KCG, the Company was managed and operated as one business, and, accordingly, operated under one reportable segment.  As a result of the acquisition of KCG, beginning in the third quarter of 2017 the Company has three operating segments: (i) Market Making; (ii) Execution Services; and (iii) Corporate.

Market Making principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions.

Execution Services comprises agency-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers.

Corporate contains the Company's investments, principally in strategic trading-related opportunities, and maintains corporate overhead expenses.

The following tables show the trading income, net, total revenues and Adjusted Net Trading Income by operating segment for the three months and full year ended December 31, 2018 and 2017.

Total revenues by operating segment
(in thousands, unaudited)

  Three Months Ended December 31, 2018
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$365,964 $264  $-  $366,228
 Commissions, net and technology services 6,927  38,581   -   45,508
 Interest and dividends income 26,060  105   7   26,172
 Other, net 923  454   2,961   4,338
         
 Total Revenues$  399,874  $  39,404   $  2,968   $  442,246
         
  Three Months Ended December 31, 2017
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$287,275 $(2,052) $1,160  $286,383
 Commissions, net and technology services 12,126  55,140   -   67,266
 Interest and dividends income 21,263  515   (2,304)  19,474
 Other, net 1,170  540   89,688   91,398
         
 Total Revenues$  321,834  $  54,143   $  88,544   $  464,521
         
  Year Ended December 31, 2018
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$1,265,866 $816  $-  $1,266,682
 Commissions, net and technology services 28,813  155,526   -   184,339
 Interest and dividends income 86,741  705   62   87,508
 Other, net 3,055  339,286   (2,152)  340,189
         
 Total Revenues$  1,384,475  $  496,333   $  (2,090) $  1,878,718
         
  Year Ended December 31, 2017
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$769,556 $(5,394) $1,865  $766,027
 Commissions, net and technology services 13,689  102,814   -   116,503
 Interest and dividends income 51,822  619   (2,034)  50,407
 Other, net 1,640  1,096   92,309   95,045
         
 Total Revenues$  836,707  $  99,135   $  92,140   $  1,027,982


Reconciliation of trading income, net to Adjusted Net Trading Income by operating segment
(in thousands, unaudited)

  Three Months Ended December 31, 2018
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$365,964  $264  $-  $366,228 
 Commissions, net and technology services 6,927   38,581   -   45,508 
 Interest and dividends income 26,060   105   7   26,172 
 Brokerage, exchange and clearance fees, net (59,676)  (14,154)  -   (73,830)
 Payments for order flow (24,234)  (30)  -   (24,264)
 Interest and dividends expense (40,118)  (497)  -   (40,615)
         
 Adjusted Net Trading Income$  274,923   $  24,269   $  7   $  299,199  
         
         
  Three Months Ended December 31, 2017    
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$287,275  $(2,052) $1,160  $286,383 
 Commissions, net and technology services 12,126   55,140   -   67,266 
 Interest and dividends income 21,263   515   (2,304)  19,474 
 Brokerage, exchange and clearance fees, net (66,715)  (19,958)  -   (86,673)
 Payments for order flow (15,586)  (70)  -   (15,656)
 Interest and dividends expense (34,295)  (347)  1,105   (33,537)
         
 Adjusted Net Trading Income$  204,068   $  33,228   $  (39) $  237,257  
         
         
  Year Ended December 31, 2018
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$1,265,866  $816  $-  $1,266,682 
 Commissions, net and technology services 28,813   155,526   -   184,339 
 Interest and dividends income 86,741   705   62   87,508 
 Brokerage, exchange and clearance fees, net (242,847)  (58,932)  -   (301,779)
 Payments for order flow (74,518)  (127)  -   (74,645)
 Interest and dividends expense (140,120)  (1,694)  -   (141,814)
         
 Adjusted Net Trading Income$  923,935   $  96,294   $  62   $  1,020,291  
         
         
  Year Ended December 31, 2017
  Market Execution    
  Making Services Corporate Total
         
 Trading income, net$769,556  $(5,394) $1,865  $766,027 
 Commissions, net and technology services 13,689   102,814   -   116,503 
 Interest and dividends income 51,822   619   (2,034)  50,407 
 Brokerage, exchange and clearance fees, net (224,706)  (32,220)  -   (256,926)
 Payments for order flow (28,038)  311   -   (27,727)
 Interest and dividends expense (92,871)  1,215   (337)  (91,993)
         
 Adjusted Net Trading Income$  489,452   $  67,345   $  (506) $  556,291  


Reconciliation of trading income, net to Adjusted Net Trading Income by category – Market Making segment

(in thousands, unaudited)

 Three Months Ended December 31, 2018
 Americas ROW Global FICC,   Total
 Equities Equities Options and Other Unallocated Market Making
          
Trading income, net$259,866  $49,776  $54,562  $1,760  $365,964 
Commissions, net and technology services 6,883   -   44   -   6,927 
Brokerage, exchange and clearance fees, net (27,854)  (17,825)  (12,878)  (1,119)  (59,676)
Payments for order flow (24,234)  -   -   -   (24,234)
Interest and dividends, net (9,914)  (2,487)  (2,312)  655   (14,058)
          
Adjusted Net Trading Income$  204,747   $  29,464   $  39,416   $  1,296   $  274,923  
          
          
 Three Months Ended December 31, 2017
 Americas ROW Global FICC,   Total
 Equities Equities Options and Other Unallocated Market Making
          
Trading income, net$186,710  $57,589  $45,022  $(2,046) $287,275 
Commissions, net and technology services 12,121   -   5   -   12,126 
Brokerage, exchange and clearance fees, net (36,266)  (19,298)  (11,976)  825   (66,715)
Payments for order flow (15,586)  -   -   -   (15,586)
Interest and dividends, net (5,857)  (3,502)  (2,447)  (1,226)  (13,032)
          
Adjusted Net Trading Income$  141,122   $  34,789   $  30,604   $  (2,447) $  204,068  
          
          
          
 Year Ended December 31, 2018
 Americas ROW Global FICC,   Total
 Equities Equities Options and Other Unallocated Market Making
          
Trading income, net$846,090  $167,638  $250,521  $1,617  $1,265,866 
Commissions, net and technology services 28,583   -   230   -   28,813 
Brokerage, exchange and clearance fees, net (120,840)  (61,703)  (56,633)  (3,671)  (242,847)
Payments for order flow (74,518)  -   -   -   (74,518)
Interest and dividends, net (31,031)  (9,517)  (11,326)  (1,505)  (53,379)
          
Adjusted Net Trading Income$  648,284   $  96,418   $  182,792   $  (3,559) $  923,935  
          
          
 Year Ended December 31, 2017
 Americas ROW Global FICC,   Total
 Equities Equities Options and Other Unallocated Market Making
          
Trading income, net$404,113  $175,840  $192,563  $(2,960) $769,556 
Commissions, net and technology services 12,184   342   (79)  1,242   13,689 
Brokerage, exchange and clearance fees, net (97,832)  (70,180)  (55,910)  (784)  (224,706)
Payments for order flow (27,600)  -   -   (438)  (28,038)
Interest and dividends, net (15,151)  (13,770)  (8,825)  (3,303)  (41,049)
          
Adjusted Net Trading Income$  275,714   $  92,232   $  127,749   $  (6,243) $  489,452  


The following tables show our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by category for the three months and full year ended December 31, 2018 and 2017:

(In thousands except percentages, unaudited)

 Three Months Ended December 31, Year Ended December 31,
Adjusted Net Trading Income by Category:2018 2017 % Change 2018 2017 % Change
            
Market Making:           
Americas Equities$204,747 $141,122  45.1% $648,284  $275,714  135.1%
ROW Equities 29,464  34,789  -15.3%  96,418   92,232  4.5%
Global FICC, Options and Other 39,416  30,604  28.8%  182,792   127,749  43.1%
Unallocated1 1,296  (2,447) NM  (3,559)  (6,243) NM
            
Total Market Making$274,923 $204,068  34.7% $923,935  $489,452  88.8%
            
Execution Services 24,269  33,228  -27.0%  96,294   67,345  43.0%
            
Corporate 7  (39) NM  62   (506) NM
            
Adjusted Net Trading Income$  299,199  $  237,257   26.1% $  1,020,291   $  556,291   83.4%
            
            
Average Daily Three Months Ended December 31, Year Ended December 31,
Adjusted Net Trading Income by Category:2018 2017 % Change 2018 2017 % Change
            
Market Making:           
Americas Equities$3,250 $2,240  45.1% $2,583  $1,098  135.1%
ROW Equities 468  552  -15.3%  384   367  4.5%
Global FICC, Options and Other 626  486  28.8%  728   509  43.1%
Unallocated1 20  (39) NM  (14)  (25) NM
            
Total Market Making$4,364 $3,239  34.7% $3,681  $1,949  88.8%
            
Execution Services 385  527  -27.0%  384   268  43.0%
            
Corporate 0  (1) NM  0   (2) NM
            
Adjusted Net Trading Income$  4,749  $  3,765   26.1% $  4,065   $  2,215   83.4%
            
            
            
1 Under our methodology for recording ‘‘trading income, net’’ in our condensed consolidated statements of comprehensive income, we recognize  
revenues based on the exit price of assets in accordance with applicable U.S. GAAP rules, and when we calculate Adjusted Net Trading  
Income for corresponding reporting periods, we start with trading income, net. By contrast, when we calculate Adjusted Net    
Trading Income by category, we recognize revenues on a daily basis, and as a result prices used in recognizing revenues may differ.  
Because we provide liquidity on a global basis, across asset classes and time zones, the timing of any particular Adjusted Net Trading Income  
calculation can defer or accelerate the amount in a particular asset class from one day to another, and, at the end of a reporting period, from one  
reporting period to another. The purpose of the Unallocated category is to ensure that Adjusted Net Trading Income by category sums to  
total Adjusted Net Trading Income, which can be reconciled to Trading Income, Net, calculated in accordance with GAAP.    
We do not allocate any resulting differences based on the timing of revenue recognition.        


Financial Condition

As of December 31, 2018, Virtu had $736.0 million in cash and cash equivalents, and total long-term debt outstanding in an aggregate principal amount of $930.8 million.

Share Repurchase Program

The Virtu Financial, Inc. Board of Directors approved the share repurchase program for $50 million Class A common stock and common units of Virtu Financial LLC in February 2018 and subsequently expanded the program to $100 million in July 2018.  Since the inception of the program, the Company has repurchased approximately 2.56 million shares and units for approximately $65.9 million.  The Company now has approximately $34.1 million remaining capacity for future purchases of common stock and common units under the plan.

Non-GAAP Financial Measures and Other Items

To supplement our unaudited condensed consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), we use the following non-GAAP measures of financial performance:

  • "Adjusted Net Trading Income", which is the amount of revenue we generate from our market making activities, or trading income, net, plus commissions, net and technology services, plus interest and dividends income and expense, net, less direct costs associated with those revenues, including brokerage, exchange and clearance fees, net and payments for order flow. Management believes that this measurement is useful for comparing general operating performance from period to period. Although we use Adjusted Net Trading Income as a financial measure to assess the performance of our business, the use of Adjusted Net Trading Income is limited because it does not include certain material costs that are necessary to operate our business. Our presentation of Adjusted Net Trading Income should not be construed as an indication that our future results will be unaffected by revenues or expenses that are not directly associated with our market making activities.
  • "EBITDA", which measures our operating performance by adjusting Net Income to exclude financing interest expense on our long-term borrowings, debt issue cost related to debt refinancing, depreciation and amortization, amortization of purchased intangibles and acquired capitalized software, and income tax expense, and "Adjusted EBITDA", which measures our operating performance by further adjusting EBITDA to exclude severance, reserve for legal matter, transaction advisory fees and expenses, termination of office leases, acquisition related retention bonus, trading related settlement income, gain on sale of business, connectivity early termination, other, net, write-down of assets, share based compensation, charges related to share based compensation at IPO, 2015 Management Incentive Plan, and charges related to share based compensation at IPO, and “Adjusted EBITDA Margin”, which compares Adjusted EBITDA to Adjusted Net Trading Income.
  • “Normalized Adjusted Net Income”, “Normalized Adjusted Net Income before income taxes”, “Normalized provision for income taxes”, and “Normalized Adjusted EPS”, which we calculate by adjusting Net Income to exclude certain items and other non-cash items, assuming that all vested and unvested Virtu Financial LLC units have been exchanged for Class A Common Stock, and applying a corporate tax rate, which was between 35.5% and 37% for periods prior to January 1, 2018 and decreasing to approximately 23% beginning January 1, 2018 as a result of the Tax Act.
  • “Adjusted Operating Expenses”, which we calculate by adjusting total operating expenses to exclude severance, share based compensation, reserve for legal matters, connectivity early termination and write-down of assets.

Total Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and Adjusted Operating Expenses are non-GAAP financial measures used by management in evaluating operating performance and in making strategic decisions. Additional information provided regarding the breakdown of Total Adjusted Net Trading Income by category is also a non-GAAP financial measure but is not used by the Company in evaluating operating performance and in making strategic decisions. In addition, these non-GAAP financial measures or similar non-GAAP measures are used by research analysts, investment bankers and lenders to assess our operating performance. Management believes that the presentation of Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and Adjusted Operating Expenses provide useful information to investors regarding our results of operations because they assist both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and Adjusted Operating Expenses provide indicators of general economic performance that are not affected by fluctuations in certain costs or other items. Accordingly, management believes that these measurements are useful for comparing general operating performance from period to period. Furthermore, our credit agreement contains covenants and other tests based on metrics similar to Adjusted EBITDA. Other companies may define Adjusted Net Trading Income, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS  and Adjusted Operating Expenses differently, and as a result our measures of Adjusted Net Trading Income, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and Adjusted Operating Expenses may not be directly comparable to those of other companies. Although we use these non-GAAP financial measures as financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business.
                   
Adjusted Net Trading Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income should be considered in addition to, and not as a substitute for, Net Income in accordance with U.S. GAAP as a measure of performance. Our presentation of Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and Adjusted Operating Expenses should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items. Adjusted Net Trading Income, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and our EBITDA-based measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

  • they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;
  • our EBITDA-based measures do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and our EBITDA-based measures do not reflect any cash requirement for such replacements or improvements;
  • they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
  • they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and
  • they do not reflect limitations on our costs related to transferring earnings from our subsidiaries to us.

Because of these limitations, Adjusted Net Trading Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income are not intended as alternatives to Net Income as indicators of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted Net Trading Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. These U.S. GAAP measurements include Net Income, cash flows from operations and cash flow data. See below a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure.


Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 Three Months Ended December 31, Year Ended December 31,
(in thousands, except share and per share data)2018 2017 2018 2017
        
        
Revenues:       
Trading income, net$366,228  $286,383  $1,266,682  $766,027 
Commissions, net and technology services 45,508   67,266   184,339   116,503 
Interest and dividends income 26,172   19,474   87,508   50,407 
Other, net 4,338   91,398   340,189   95,045 
        
Total revenues 442,246   464,521   1,878,718   1,027,982 
        
Operating Expenses:       
Brokerage, exchange and clearance fees, net 73,830   86,673   301,779   256,926 
Communication and data processing 38,327   48,316   176,120   131,506 
Employee compensation and payroll taxes 64,833   66,436   215,556   177,489 
Payments for order flow 24,264   15,656   74,645   27,727 
Interest and dividends expense 40,615   33,537   141,814   91,993 
Operations and administrative 13,100   25,302   64,749   61,466 
Depreciation and amortization 13,596   18,170   61,154   47,327 
Amortization of purchased intangibles and       
acquired capitalized software 6,081   8,901   26,123   15,447 
Termination of office leases 57   1,860   23,357   3,671 
Debt issue cost related to debt refinancing -   1,109   11,727   10,460 
Transaction advisory fees and expenses 2,502   950   11,487   25,270 
Reserve for legal matters -   2,833   2,020   657 
Charges related to share based compensation at IPO -   227   24   772 
Financing interest expense on long-term borrowings 16,264   23,966   71,800   64,107 
        
Total operating expenses 293,469   333,936   1,182,355   914,818 
        
Income before income taxes and noncontrolling interest 148,777   130,585   696,363   113,164 
Provision for income taxes 841   97,184   76,171   94,266 
        
Net income$147,936  $33,401  $620,192  $18,898 
        
Noncontrolling interest (67,068)  (22,425)  (330,751)  (15,959)
        
        
Net income available for common stockholders$80,868  $10,976  $289,441  $2,939 
        
Earnings per share:       
Basic$0.75  $0.12  $2.82  $0.03 
Diluted$0.74  $0.12  $2.78  $0.03 
      0   
        
Weighted average common shares outstanding       
Basic 106,309,194   89,362,838   100,875,793   62,579,147 
Diluted 106,970,415   89,362,838   102,089,138   62,579,147 
        
Comprehensive income:       
Net income$147,936  $33,401  $620,192  $18,898 
Other comprehensive income (loss)       
Foreign exchange translation adjustment, net of taxes 1,037   817   (2,677)  9,117 
        
Comprehensive income$148,973  $34,218  $617,515  $28,015 
Less: Comprehensive income attributable to noncontrolling interest (67,517)  (22,847)  (329,756)  (21,833)
        
Comprehensive income available for common stockholders$81,456  $11,371  $287,759  $6,182 


Virtu Financial, Inc. and Subsidiaries
Reconciliation to Non-GAAP Operating Data (Unaudited)

The following tables reconcile Condensed Consolidated Statements of Comprehensive Income to arrive at Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, and selected Operating Margins.

        
 Three Months Ended December 31,Year Ended December 31,
(in thousands, except percentages)2018 2017 2018 2017
        
        
Reconciliation of Trading income, net to Adjusted Net Trading Income      
Trading income, net$  366,228  $  286,383  $  1,266,682  $  766,027 
Commissions, net and technology services   45,508     67,266     184,339     116,503 
Interest and dividends income   26,172     19,474     87,508     50,407 
Brokerage, exchange and clearance fees, net   (73,830)    (86,673)    (301,779)    (256,926)
Payments for order flow   (24,264)    (15,656)    (74,645)    (27,727)
Interest and dividends expense   (40,615)    (33,537)    (141,814)    (91,993)
        
Adjusted Net Trading Income$  299,199  $  237,257  $  1,020,291  $  556,291 
        
Reconciliation of Net Income to EBITDA and Adjusted EBITDA       
Net income$  147,936  $  33,401  $  620,192  $  18,898 
Financing interest expense on long-term borrowings   16,264     23,966     71,800     64,107 
Debt issue cost related to debt refinancing   -      1,109     11,727     10,460 
Depreciation and amortization   13,596     18,170     61,154     47,327 
Amortization of purchased intangibles and acquired capitalized software   6,081     8,901     26,123     15,447 
Provision for income taxes   841     97,184     76,171     94,266 
        
EBITDA$  184,718  $  182,731  $  867,167  $  250,505 
        
Severance   1,901     4,739     10,974     14,911 
Reserve for legal matters   -      2,833     2,020     657 
Transaction advisory fees and expenses   2,502     950     11,487     25,270 
Termination of office leases   57     1,860     23,357     3,671 
Acquisition related retention bonus   -      -      -      23,050 
Trading related settlement income   -      (628)    -      (628)
Connectivity early termination   -      -      7,062     -  
Loss (gain) on sale of businesses   -      -      (335,210)    -  
Other, net   (4,338)    (91,398)    (4,979)    (95,045)
Write-down of assets   -      672     3,239     1,216 
Share based compensation   8,852     4,723     29,065     21,825 
Charges related to share based compensation at IPO, 2015 Management Incentive Plan   1,425     1,091     5,781     5,225 
Charges related to share based compensation awards at IPO   -      223     24     740 
        
Adjusted EBITDA$  195,117  $  107,796  $  619,987  $  251,397 
        
        
Selected Operating Margins       
Net Income Margin1 49.4%  14.1%  60.8%  3.4%
EBITDA Margin2 61.7%  77.0%  85.0%  45.0%
Adjusted EBITDA Margin3 65.2%  45.4%  60.8%  45.2%
        
1 Calculated by dividing net income by Adjusted Net Trading Income.       
2 Calculated by dividing EBITDA by Adjusted Net Trading Income.       
3 Calculated by dividing Adjusted EBITDA by Adjusted Net Trading Income.       

        

Virtu Financial, Inc. and Subsidiaries
Reconciliation to Non-GAAP Operating Data (Unaudited)
(Continued)

The following tables reconcile Condensed Consolidated Statements of Comprehensive Income to arrive at Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted Net Income and Normalized Adjusted EPS.

 Three Months Ended December 31, Year Ended December 31,
(in thousands, except per share data)2018 2017 2018 2017
        
        
Reconciliation of Net Income to Normalized Adjusted Net Income       
Net income$  147,936  $  33,401  $  620,192  $  18,898 
Provision for income taxes   841     97,184     76,171     94,266 
        
Income before income taxes$  148,777  $  130,585  $  696,363  $  113,164 
        
Amortization of purchased intangibles and acquired capitalized software   6,081     8,901     26,123     15,447 
Financing interest expense related to KCG transaction   -      -      -      4,626 
Debt issue cost related to debt refinancing   -      1,109     11,727     10,460 
Severance   1,901     4,739     10,974     14,911 
Reserve for legal matters   -      2,833     2,020     657 
Transaction advisory fees and expenses   2,502     950     11,487     25,270 
Termination of office leases   57     1,860     23,357     3,671 
Connectivity early termination   -      -      7,062     -  
Write-down of assets   -      672     3,239     2,849 
Acquisition related retention bonus   -      -      -      23,050 
Trading related settlement income   -      (628)    -      (628)
Loss (gain) on sale of businesses   -      -      (335,210)    -  
Other, net   (4,338)    (91,398)    (4,979)    (95,045)
Share based compensation   8,852     4,723     29,065     21,825 
Charges related to share based compensation at IPO, 2015 Management Incentive Plan   1,425     1,091     5,781     5,225 
Charges related to share based compensation awards at IPO   -      223     24     740 
        
Normalized Adjusted Net Income before income taxes$  165,257  $  65,660  $  487,033  $  146,222 
        
Normalized provision for income taxes1   38,009     24,295     112,018     54,102 
        
Normalized Adjusted Net Income$  127,248  $  41,365  $  375,015  $  92,120 
        
Weighted Average Adjusted shares outstanding2   191,174,005     188,248,614     190,959,477     161,464,923 
        
Normalized Adjusted EPS$  0.67  $  0.22  $  1.96  $  0.57 
        
1 Reflects U.S. federal, state, and local income tax rate applicable to corporations of approximately 23% for 2018 and 37% for 2017    
2 Assumes that (1) holders of all vested and unvested Virtu Financial LLC Units (together with corresponding shares of Class C common stock),  
have exercised their right to exchange such Virtu Financial LLC Units for shares of Class A common stock on a one-for-one basis,  (2) holders  
of all Virtu Financial LLC Units (together with corresponding shares of Class D common stock), have exercised their right to exchange such   
Virtu Financial LLC Units for shares of Class B common stock on a one-for-one basis, and subsequently exercised their right to convert    
the shares of Class B common stock into shares of Class A common stock on a one-for-one basis.      
        


Virtu Financial, Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Condition (Unaudited)

 December 31 December 31,
 2018 2017
    
 (in thousands, except share data)
Assets   
Cash and cash equivalents$  736,047 $  532,887 
Securities borrowed   1,399,684    1,471,172 
Securities purchased under agreements to resell   15,475    -  
Receivables from broker-dealers and clearing organizations   1,101,449    972,018 
Trading assets, at fair value   2,639,921    2,712,622 
Property, equipment and capitalized software, net   113,322    137,018 
Goodwill   836,583    844,883 
Intangibles (net of accumulated amortization)   83,989    111,224 
Deferred taxes   200,359    125,760 
Assets of business held for sale   -     55,070 
Other assets   254,149    357,352 
Total assets$  7,380,978 $  7,320,006 
    
Liabilities and equity   
Liabilities   
Short-term borrowings, net$  15,128 $  27,883 
Securities loaned   1,130,039    754,687 
Securities sold under agreements to repurchase   281,861    390,642 
Payables to broker-dealers and clearing organizations   567,441    716,205 
Trading liabilities, at fair value   2,475,395    2,384,598 
Tax receivable agreement obligations   214,403    147,040 
Accounts payable and accrued expenses and other liabilities   294,975    358,825 
Long-term borrowings, net   907,037    1,388,548 
Total liabilities$  5,886,279 $  6,168,428 
    
Total equity   1,494,699    1,151,578 
    
    
Total liabilities and equity$  7,380,978 $  7,320,006 
    
    
 As of December 31, 2018
Ownership of Virtu Financial LLC Interests:Interests %
    
Virtu Financial, Inc. - Class A Common Stock and Restricted Stock Units   108,155,199 56.6%
Non-controlling Interests (Virtu Financial LLC)   82,841,626 43.4%
    
Total Virtu Financial LLC Interests   190,996,825 100.0%
    


About Virtu Financial, Inc.

Virtu is a leading financial firm that leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to our clients. As a market maker, Virtu provides deep liquidity that helps to create more efficient markets around the world. Our market structure expertise, broad diversification, and execution technology enables us to provide competitive bids and offers in over 25,000 securities, at over 235 venues, in 36 countries worldwide.

Cautionary Note Regarding Forward-Looking Statements

The foregoing information and certain oral statements made from time to time by representatives of the Company contain certain forward-looking statements that reflect the company's current views with respect to certain current and future events and financial performance, including with respect to integration of KCG and synergy realization and with respect to the acquisition of ITG and related integration and synergy realization. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company's operations and business environment which may cause the company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company's financial results may be found in the Company's filings with the Securities and Exchange Commission.

CONTACT              

Investor Relations
Andrew Smith
Virtu Financial, Inc.
(212) 418-0195
investor_relations@virtu.com

Media Relations
media@virtu.com